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Refi-ing when House Appraises below Principal Remaining

Pardon what may be a naive question: $300k is the principal remaining on a house mortgage. The house's appraised value is currently $280k. Is it even possible for the house owner to refinance the original $300k at a different rate of interest?

I thought I read in the paper today that lenders do not refi when the appraised value is less than what is owed. Granted the bank's collateral stinks (the house is worth less than the loan amount). OTOH, it gets to loan out (for points and interest) a higher amount. Again, pardon any naivete here. I want to understand just how strapped some folks may be.

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Reply to
Elle
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You will not likely get a conforming 1st mortgage in this case. But you might get an 80% 1st for $224,000, and then a H/E loan for the remaining $76,000. H/E loans can go beyond the 100% equity value up to 125%, which would be $375 in your case. The interest rate on the H/E is not going to be great, but the first mortgage should be OK, maybe a point or two above market for not having equity.

-john-

Reply to
John A. Weeks III

Thank you John Weeks. That helped.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Elle

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